Russian state oil giant Rosneft, targeted by western sanctions over the Kremlin’s interference in Ukraine, is the beneficiary of a $10 billion (€8.06 billion) bond issuance programme with an IFSC-based affiliate in Dublin.
The Moscow-based group has declined to say whether the bond scheme will be disrupted by EU and US penalties against Rosneft and senior management figures in the business over the conflict in Ukraine. “Rosneft will not comment on the issue,” said Ignat Pavlov, a spokesman for Rosneft.
The affiliate’s immediate parent, which is a Dublin unit of Deutsche Bank, also declined to discuss the outlook for the bond programme.
“We are following developments and are applying any sanctions if appropriate and as directed by the relevant authorities,” said a London-based spokesman for Deutsche.
Rosneft International Finance Ltd was established in Dublin in October 2012 as a special purpose vehicle to finance loans for Rosneft Oil Company, the world’s fastest growing oil business and a top contributor to Russia’s budget.
Rosneft, which produces more oil than Iraq or Iran, is the only borrower on the books of Rosneft International Finance. Bank of Ireland is a banker to the Dublin company, Arthur Cox solicitors acts for it and Ernst & Young’s Dublin office is its auditor.
While the directors of Rosneft International Finance state in newly filed accounts that they are monitoring the impact of the sanctions, they anticipate that the firm’s operations will continue to generate enough cash flow to meet liabilities as they fall due.
Rosneft International Finance, whose shareholder is a Deutsche International Corporate Services (Ireland) Ltd in the IFSC, entered a $10 billion loan agreement with Rosneft on December 5th, 2012, to issue debt on its behalf. The day after this agreement, this vehicle issued a $2 billion 10-year loan and a $1 billion five-year loan to Rosneft.
Such loans were issued well before the European authorities and US government imposed a swathe of sanctions against Russian officials, businessmen and companies, Rosneft among them.
“So far, these events have not had a significant impact on Rosneft’s ability to pay its obligations to the company,” said the directors of Rosneft International Finance in a note with the accounts.
“Due to the difficulty of assessing the future impact of these events and any additional sanctions that might be imposed by the EU and USA in the case of the continuous instability in Ukraine, the company’s management will continue to monitor the situation and reassess any potential impact to the company’s operations and financial position.”
The American sanctions are cast to slowly starve Rosneft of US dollar funding by prohibiting it from engaging in any “new debt of longer than 90 days maturity or new equity” with energy firms and banks. Similarly, the EU sanctions prevent Rosneft from raising long-term debt on European capital markets.
The ultimate impact of these penalties remains unclear, but they are widely held to have complicated Rosneft’s efforts to service its $55 billion debt.
The Rosneft International Finance accounts do not cover the period in which sanctions were imposed but directors said there had been “no significant subsequent events” requiring disclosure.
Rosneft has insisted it is not concerned about the situation. It has asked for some $40 billion in support from the Russian state in the wake of the sanctions and was told such aid would be granted.
